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Tuesday, 22 July 14
INDONESIAN ELECTION RESULT ENCOURAGING FOR FOREIGN INVESTMENT IN ENERGY AND MINING SECTORS - WOOD MACKENZIE
 Joko Widodo-Jusuf Kalla has been announced as the official winner of Indonesia's presidential election. Joko Widodo, or Jokowi, is viewed as a more progressive and pragmatic choice for President than his opponent, Prawbowo Subianto.
Wood Mackenzie says that Jokowi's victory will generate short-term positivity for foreign companies looking to invest in Indonesia's energy and mining sectors. However, the new government's ability to implement reforms remains uncertain. A lack of a majority in the senate will weaken the government's ability to push through all reforms required to reinvigorate the investment environment and contribute to a revived Indonesian economy. The significance of this political development for the mining, upstream oil and gas, and fuel sectors are noted below.
Mining
Jokowi could shift the regulatory environment towards being more accommodating of foreign investment and mining in general. Wood Mackenzie's Senior Coal Analyst Rory Simington explains, "Mining-friendly regulatory change is possible, however it is likely to be incremental rather than exponential." Implications for the mining sector are:
- Current official policies are unlikely to be reversed. These include the ban on mineral exports, requirements for divesture of foreign ownership, and Coal Contracts of Work renegotiation.
- The previous DPI-P led government of Megawati Sukarnoputri from 2001 to 2004 showed a willingness to appoint people from industry instead of politicians to prominent positions in key ministries. If the Widodo led DPI-P coalition government appoints a competent administrator with industry experience to head the Department of Energy and Mineral Resources, this could result in mining friendly changes to the regulatory environment.
- Based on discussions with industry contacts in Indonesia, we believe that changes could include easing of foreign investment divesture requirements, and reducing minimum levels of purity that must be achieved for metals refining before export is allowed. Any changes are likely to be incremental rather than exponential.
Upstream oil and gas
Wood Mackenzie believes the wider implications of the election result will be felt more in the oil and gas sector. Wood Mackenzie's Senior Upstream Analyst, Andrew Harwood says, "At a time of growing domestic energy demand, declining indigenous production, and after several years of regulatory instability, the government's ability to implement Jokowi's proposed reforms will be key." Implications for the upstream sector are:
- Indonesia's crude output has fallen from over 1 million barrels per day in 2005 to currently just over 800,000. The domestic fuel subsidy bill is approaching US$21 billion (bn) in 2014, and regulatory uncertainty has stalled several major investment projects, such as Chevron's Indonesia Deepwater development, Inpex's Abadi FLNG and BP's Tangguh expansion.
- Jokowi has outlined plans to reduce Indonesia's reliance on oil imports by developing new gas infrastructure and accelerating the switch to gas. He aims to boost oil and gas output by providing enhanced fiscal terms for mature fields and exploration, and removing red-tape, which would also apply to the mining sector.
- A revision of the 2001 Oil and Gas Law and formalisation of the upstream regulator's role is a longer term objective that would enhance the investment environment by removing regulatory uncertainty. The sanction of Chevron's Indonesia Deepwater development, Inpex's Abadi FLNG and BP's Tangguh expansion could generate over US$30bn of new investment in Indonesia's oil and gas sector.
- While we would expect PERTAMINA to play a greater role in Indonesia's upstream sector under Jokowi, the new president also recognises the benefits of working with international investors to secure technological know-how as well as investment.
- Overall, Jokowi's victory will generate short-term positivity in the energy sector. However, the new government's ability to implement the proposed reforms remains uncertain.
Fuels market
Sushant Gupta, Head of Asia Pacific Downstream Research, says, "Subsidies are a huge burden to the government because around 60% of the total oil demand is subsidised. During the period of 2014-2020, we estimate the total fuel subsidy bill to be around US$120bn, assuming current domestic prices in Indonesia. This accounts for around three-percent of GDP and is therefore unsustainable." As a result, Wood Mackenzie expects Jokowi's government to make changes:
- The government is expected to push through further price reforms, which will impact near-term demand. However, the income-effect prevails in the medium term and will drive demand growth.
- If subsidies are sharply reduced, we could see a demand drop of around 60-70 thousand barrels per day (kb/d) in gasoline and 45-50 kb/d in diesel.
- The current market size of unsubsidised retail fuels (gasoline and diesel) is very small; however, there is a huge upside potential if the government fully deregulates the market. This would provide a good market opportunity to foreign players operating in the unsubsidised retail fuels market or new players looking to invest in refining and retail sectors in Indonesia.
Editor’s notes:
Wood Mackenzie is a global leader in commercial intelligence for the energy, metals and mining industries. We provide objective analysis and advice on assets, companies and markets, giving clients the insights they need to make better strategic decisions. For more information visit: www.woodmac.com
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Monday, 30 June 14
INDO - INDIA FREIGHT RATES CONTINUE TO WEAK
COALspot.com: The latest dry Index shows that average all-in spot freight declined, the Panamax and Supramax slipping by 9.11 percent and 4% respec ...
Friday, 27 June 14
DRY BULK MARKET STILL LOOKING FOR UPSIDE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has kept up its lacklustre performance during the past week, as evidenced by the course of the Baltic Dry Index (BDI). The BDI ...
Thursday, 26 June 14
PANAMAX : A PACIFIC ROUND PAYS AROUND US$ 3K DAILY - FEARNLEYS AS
Handy
In the Atlantic there has been little activity which again has caused rates to slip across all trades. TA´s are now down to US$ 5,500 ...
Thursday, 26 June 14
KOMIPO INVITES BIDS FOR TOTAL 750K MT OF BITUMINOUS COAL FOR 3CY
COALspot.com: South Korean state-owned utility Korea Midland Power (KOMIPO) has issued a new tender for supply of total 250,000 MT of bituminous co ...
Thursday, 26 June 14
COAL DIVESTMENT CAMPAIGNS COME WITH RISKY UNINTENDED CONSEQUENCES - WCA
Last week I presented to the Expert Group on investments in coal and petroleum companies, the body set up to advise the Norwegian Government on whe ...
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- Salva Resources Pvt Ltd - India
- India Bulls Power Limited - India
- Singapore Mercantile Exchange
- Sakthi Sugars Limited - India
- Indian Oil Corporation Limited
- Vijayanagar Sugar Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Samtan Co., Ltd - South Korea
- Planning Commission, India
- Kapuas Tunggal Persada - Indonesia
- Timah Investasi Mineral - Indoneisa
- Global Business Power Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- Makarim & Taira - Indonesia
- Eastern Energy - Thailand
- Electricity Generating Authority of Thailand
- Kaltim Prima Coal - Indonesia
- Minerals Council of Australia
- Pendopo Energi Batubara - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Bukit Makmur.PT - Indonesia
- The University of Queensland
- Interocean Group of Companies - India
- Kumho Petrochemical, South Korea
- Alfred C Toepfer International GmbH - Germany
- Bukit Baiduri Energy - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Coalindo Energy - Indonesia
- Coastal Gujarat Power Limited - India
- Indonesian Coal Mining Association
- Agrawal Coal Company - India
- Maharashtra Electricity Regulatory Commission - India
- Sindya Power Generating Company Private Ltd
- Tamil Nadu electricity Board
- European Bulk Services B.V. - Netherlands
- Parliament of New Zealand
- Global Green Power PLC Corporation, Philippines
- Kepco SPC Power Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Carbofer General Trading SA - India
- Cement Manufacturers Association - India
- Binh Thuan Hamico - Vietnam
- Jaiprakash Power Ventures ltd
- Mintek Dendrill Indonesia
- Australian Commodity Traders Exchange
- The Treasury - Australian Government
- New Zealand Coal & Carbon
- Orica Australia Pty. Ltd.
- PetroVietnam Power Coal Import and Supply Company
- Parry Sugars Refinery, India
- Standard Chartered Bank - UAE
- SN Aboitiz Power Inc, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Uttam Galva Steels Limited - India
- White Energy Company Limited
- Goldman Sachs - Singapore
- Cigading International Bulk Terminal - Indonesia
- Sojitz Corporation - Japan
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Posco Energy - South Korea
- Bahari Cakrawala Sebuku - Indonesia
- Independent Power Producers Association of India
- Directorate General of MIneral and Coal - Indonesia
- Dalmia Cement Bharat India
- TNB Fuel Sdn Bhd - Malaysia
- Therma Luzon, Inc, Philippines
- Electricity Authority, New Zealand
- Sree Jayajothi Cements Limited - India
- Heidelberg Cement - Germany
- Bayan Resources Tbk. - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Semirara Mining and Power Corporation, Philippines
- CNBM International Corporation - China
- Semirara Mining Corp, Philippines
- Antam Resourcindo - Indonesia
- MS Steel International - UAE
- San Jose City I Power Corp, Philippines
- CIMB Investment Bank - Malaysia
- Energy Development Corp, Philippines
- Australian Coal Association
- GVK Power & Infra Limited - India
- Mercator Lines Limited - India
- Oldendorff Carriers - Singapore
- Edison Trading Spa - Italy
- GAC Shipping (India) Pvt Ltd
- South Luzon Thermal Energy Corporation
- Simpson Spence & Young - Indonesia
- Bangladesh Power Developement Board
- Petron Corporation, Philippines
- Gujarat Sidhee Cement - India
- Central Java Power - Indonesia
- VISA Power Limited - India
- Global Coal Blending Company Limited - Australia
- Straits Asia Resources Limited - Singapore
- Africa Commodities Group - South Africa
- Coal and Oil Company - UAE
- Sical Logistics Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Madhucon Powers Ltd - India
- Ind-Barath Power Infra Limited - India
- Savvy Resources Ltd - HongKong
- Star Paper Mills Limited - India
- Indika Energy - Indonesia
- Orica Mining Services - Indonesia
- Xindia Steels Limited - India
- Medco Energi Mining Internasional
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Georgia Ports Authority, United States
- Altura Mining Limited, Indonesia
- Port Waratah Coal Services - Australia
- Bhatia International Limited - India
- OPG Power Generation Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- ASAPP Information Group - India
- Miang Besar Coal Terminal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Indogreen Group - Indonesia
- Latin American Coal - Colombia
- London Commodity Brokers - England
- GN Power Mariveles Coal Plant, Philippines
- Anglo American - United Kingdom
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mjunction Services Limited - India
- Romanian Commodities Exchange
- Ceylon Electricity Board - Sri Lanka
- Vizag Seaport Private Limited - India
- Gujarat Electricity Regulatory Commission - India
- Sarangani Energy Corporation, Philippines
- Mercuria Energy - Indonesia
- Tata Chemicals Ltd - India
- PTC India Limited - India
- Ambuja Cements Ltd - India
- PowerSource Philippines DevCo
- Marubeni Corporation - India
- Trasteel International SA, Italy
- Rio Tinto Coal - Australia
- Commonwealth Bank - Australia
- SMC Global Power, Philippines
- Krishnapatnam Port Company Ltd. - India
- Central Electricity Authority - India
- Merrill Lynch Commodities Europe
- Chettinad Cement Corporation Ltd - India
- Aditya Birla Group - India
- Lanco Infratech Ltd - India
- Toyota Tsusho Corporation, Japan
- LBH Netherlands Bv - Netherlands
- Kohat Cement Company Ltd. - Pakistan
- Indian Energy Exchange, India
- GMR Energy Limited - India
- Borneo Indobara - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Jindal Steel & Power Ltd - India
- Barasentosa Lestari - Indonesia
- SMG Consultants - Indonesia
- Metalloyd Limited - United Kingdom
- Riau Bara Harum - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Manunggal Multi Energi - Indonesia
- Deloitte Consulting - India
- Banpu Public Company Limited - Thailand
- PNOC Exploration Corporation - Philippines
- IHS Mccloskey Coal Group - USA
- Sinarmas Energy and Mining - Indonesia
- Meenaskhi Energy Private Limited - India
- Eastern Coal Council - USA
- Thiess Contractors Indonesia
- Directorate Of Revenue Intelligence - India
- Intertek Mineral Services - Indonesia
- Bulk Trading Sa - Switzerland
- Meralco Power Generation, Philippines
- Power Finance Corporation Ltd., India
- Thai Mozambique Logistica
- Ministry of Finance - Indonesia
- Indo Tambangraya Megah - Indonesia
- Wilmar Investment Holdings
- Essar Steel Hazira Ltd - India
- Ministry of Transport, Egypt
- Aboitiz Power Corporation - Philippines
- Asmin Koalindo Tuhup - Indonesia
- TeaM Sual Corporation - Philippines
- Kalimantan Lumbung Energi - Indonesia
- Bharathi Cement Corporation - India
- Gujarat Mineral Development Corp Ltd - India
- Videocon Industries ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kideco Jaya Agung - Indonesia
- The State Trading Corporation of India Ltd
- Bhoruka Overseas - Indonesia
- Iligan Light & Power Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Maheswari Brothers Coal Limited - India
- Economic Council, Georgia
- McConnell Dowell - Australia
- Siam City Cement PLC, Thailand
- Kobexindo Tractors - Indoneisa
- Bhushan Steel Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- AsiaOL BioFuels Corp., Philippines
- Wood Mackenzie - Singapore
- Siam City Cement - Thailand
- Vedanta Resources Plc - India
- Larsen & Toubro Limited - India
- Grasim Industreis Ltd - India
- Malabar Cements Ltd - India
- Kartika Selabumi Mining - Indonesia
- Ministry of Mines - Canada
- Attock Cement Pakistan Limited
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Renaissance Capital - South Africa
- ICICI Bank Limited - India
- Globalindo Alam Lestari - Indonesia
- Chamber of Mines of South Africa
- Baramulti Group, Indonesia
- IEA Clean Coal Centre - UK
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